Tuesday, April 12, 2016
Trade Approach to Understanding Entrepreneurship
Entrepreneur
An entrepreneur is one who creates a new business in the face
of risk and uncertainty for achieving profit and growth opportunities and
assembles the necessary resources to capitalize on those opportunities. While
we may not be able to teach entrepreneurship, we can teach the skills of small
business management. This is an important distinction to make to students.
Noted psychologist David McClelland characterized high achievers/entrepreneurs
as possessing these traits:
v Desire for responsibility
v Preference for moderate risk (risk
eliminators)
v Confidence in their ability to
succeed
v Desire for immediate feedback
v High level of energy
v Future orientation (serial
entrepreneurs)
v Skill in organization
v Value of achievement over money
Other
characteristics of entrepreneurs include:
v High degree of commitment
v Willingness to accept risk, work hard
and take action
v Flexibility
The Benefits of Entrepreneurship
The primary benefits entrepreneurs enjoy include the
opportunity to:
v
Create their own destiny
v
Make a difference
v
Reach their full potential
v
Generate impressive profits
v
Contribute to society and be recognized for
their efforts
v
Do what they enjoy and have fun at it!
The Potential Drawbacks of Entrepreneurship
With these potential
rewards, Entrepreneurship also presents risk and uncertainty. Entrepreneurs may
experience:
v
Uncertainty of income –”The entrepreneur is the
last one to be paid.”
v
Risk of losing their entire investment
v
Long hours and hard work
v
Lower quality of life until the business gets
established
v
High levels of stress
v
Complete responsibility
v
Discouragement
The Power of “Small” Business
Because big business is more visible than
small business, most people underestimate the role of the small firm in the
U.S. economy. The definition of a “Small Business” is: 1. One which is
independently owned and operated and not dominant in its field. 2. Eligibility
requirements are based on the specific industry.
v
Retailing – annual sales/receipts not exceeding
$3.5 to $13.5 million.
v
Services – annual receipts not exceeding $2.5 to
$14.5 million.
v
Wholesaling – yearly sales must not be over $9.5
to $22 million.
v
Agriculture – annual receipts not exceeding $1.0
to $3.5 million.
v
Construction – General construction with annual
receipts not exceeding $17 million.
v
Special Trade Construction – annual receipts not
exceeding $7 million.
v
Manufacturing – maximum number of employees may
range from 500 to 1,500 depending on the industry. The most commonly used
measure of small business is the number of employees on a firm’s payroll. The
White House Conference on Small Business definition is: A firm employing 500
people or fewer.
The Committee for Economic Development states that a small business
must meet two of four stated criteria:
v
Management is independent.
v
Capital is supplied and ownership is held by an
individual or a small group.
v
Area of operation is mainly local; markets need
not be local.
v
Size is small when compared to the biggest unit
in the field
The Ten Deadly Mistakes of Entrepreneurship Studies have indicated that there are common
reasons for new business ventures to fail. These causes of small business
failure may include:
v
Management mistakes
v
Lack of experience
v
Poor financial control
v
Weak marketing efforts
v
Failure to develop a strategic plan
v
Uncontrolled growth
v
Poor location
v
Improper inventory control
v
Incorrect pricing
v
Inability to make the “entrepreneurial
transition”
Putting Failure into Perspective
Entrepreneurs don’t fail—the
venture fails.
v There
are no such things as failures, only results.
v Always
look to turn a negative situation into a positive opportunity.
v Have
no fear of failure and be sure to have a contingency plan.
v The
only people who never fail are those who never do anything or never attempt
anything new. The successful entrepreneur understands the meaning of these
clichés and knows how to deal with adversity in a proactive and positive manner
How to Avoid the Pitfalls
These same studies have indicated that entrepreneurs can
increase their chances for success if they:
v
Know
their business in depth.
v
Develop a
solid business plan in writing.
v
Manage financial resources.
v
Understand financial statements.
v
Learn to manage people effectively.
v
Keep in
tune with who they are.
U.S. takes a positive “negative” approach to
trade with Cuban entrepreneurs
In keeping with the Obama
Administration's fresh approach to relations with Cuba, on Friday
the State Department released its list of
goods and services eligible for importation from the nascent but growing Cuban
private sector. Americans can now directly support independent Cuban
entrepreneurs and cooperatives through commerce, a move policy makers hope will
empower them to determine their own economic and political futures.
The Section 515.582 list, characterized as a "living document" that
will be updated periodically, further clarifies the path breaking Commerce and
Treasury Department regulations released in January. It takes a permissive, "negative"
approach that identifies specific prohibited categories of items and allows
everything not specifically listed as permissible items for importation to the
United States. It lays out a flexible framework and sets the right tone for
encouraging trade with the approximately 500,000 registered self-employed
workers.
Certain goods like some agricultural
products (sugar, tobacco), some textiles (cotton, wool) pharmaceuticals, and
base metals (nickel) are, not surprisingly, excluded, since these products are
almost exclusively produced by state owned enterprises. Notably, unlike the
itemized list of goods, the new regulations authorize importation of all
private sector services, which will allow U.S. businesses to access the human
capital for which the island is well known. For example, Americans can now hire
Cuban entrepreneurs or cooperatives to design software, provide accounting
support, or translate documents, as long as they are certified as independent
of the state. The negative approach looks like a very positive approach indeed.
The execution of this policy, however,
is fraught with challenges stemming from the fifty-plus years of icy relations
and the current Cuban context.
v Shipping. Cuba and the United States still do not have direct mail
services and the U.S. embargo precludes most global providers (UPS, FedEx, and
DHL) from shipping between the two countries. The most workable alternative to
standard shipping is unaccompanied baggage transported on the daily charter
flights between (primarily) Florida and the island.
v While not well suited to commercial shipping, this
arrangement would facilitate initial micro-exchanges, build confidence and work
out the kinks.
v Tariffs. Goods imported from Cuban entrepreneurs valued over $800
in total will be subject to Smoot-Hawley level tariffs, as high as 50% in some
cases. As a member of the WTO, Cuba enjoys Most Favored Nation status but a
national security exception in the U.S. embargo permits these highway robbery
level tariffs. At least in the short- to medium-term, importers face cost-prohibitive
fees.
v Financial transactions. The January 16 regulatory changes permit the use of debit
and credit cards on the island and allow U.S. financial institutions to open
correspondent accounts on the island to "facilitate the processing of
authorized transactions." However, this will take time to implement and
requires that the relevant actors (Visa, Mastercard, Western Union and major
U.S.-based banks) be prepared to take the risk given the uncertain regulatory
environment in Cuba. Most Cubans deal in cash rather than through the highly overregulated
Cuban state banking system, which is smaller now than it was in 1959. Until
financial institutions set up the necessary infrastructure, it may still be
difficult to issue payment for services rendered or goods sent, outside of cash
transactions.
v Categories of entrepreneurs. U.S. importers can only engage in transactions with
independent Cuban entrepreneurs demonstrated by documentation such as the
entity's self-employment or "cuentapropista" license issued by the
Cuban government. At present, the Cuban government has identified only 201 categories of activities
authorized for self-employment. Huge swaths of Cuba's human capital are
excluded from participating in this emerging sector, primarily highly educated
professions like economists, engineers, lawyers, and doctors. It remains to be
seen if the Cuban government will expand the number of permissible categories
or switch to a negative list, like the State Department imports list.
v Communication. Cuba remains one of the lowest ranked countries in terms
of internet access, making it difficult to receive and fill orders, communicate
with buyers, or establish call centers. Cuban citizens are eager to modernize
and expand their telecommunications infrastructure, but the Cuban government
has been very slow in expanding access and will likely be reticent to cede
control. The new regulations issued in Janaury allow U.S. telecommunications
companies to compete more readily in the Cuban market but it remains to be seen
whether Havana is interested.
v The greatest unknown is how the Cuban government will
react to these and other elements of the President's new policy of engagement.
It is unclear, for example, whether entrepreneurs will even be permitted to
export goods and services in the short term. To create a more business friendly
environment and attract much-needed investment, Cuba's regulatory framework and
judicial system require significant reforms. This is a much longer-term
challenge that Cuba must grapple with, but as the international community and
incipient Cuban private sector become more active, pressure for deeper and
faster reform should grow.
v This policy shift and resulting regulatory changes are
complex issues and, by government standards, they have been drafted and
implemented swiftly. It will take time for companies to catch up and evaluate
whether to take on the risks of engagement. But the benefits are clear: the
authorization of imports from Cuban entrepreneurs inserts capital into the
non-state sector, builds relationships between Cuban and American citizens, and
perhaps even facilitates some much-needed reconciliation between the two
countries. Congress would do well to consider the positive
impact trade could have on Cuban citizens as it considers the
recently introduced bipartisan legislation to end the embargo.
Characteristic of Entrepreneurship
Entrepreneur
An entrepreneur is one who creates a new business in the face
of risk and uncertainty for achieving profit and growth opportunities and
assembles the necessary resources to capitalize on those opportunities. While
we may not be able to teach entrepreneurship, we can teach the skills of small
business management. This is an important distinction to make to students.
Noted psychologist David McClelland characterized high achievers/entrepreneurs
as possessing these traits:
v Desire for responsibility
v Preference for moderate risk (risk
eliminators)
v Confidence in their ability to
succeed
v Desire for immediate feedback
v High level of energy
v Future orientation (serial
entrepreneurs)
v Skill in organization
v Value of achievement over money
Other
characteristics of entrepreneurs include:
v High degree of commitment
v Willingness to accept risk, work hard
and take action
v Flexibility
The Benefits of Entrepreneurship
The primary benefits entrepreneurs enjoy include the
opportunity to:
v
Create their own destiny
v
Make a difference
v
Reach their full potential
v
Generate impressive profits
v
Contribute to society and be recognized for
their efforts
v
Do what they enjoy and have fun at it!
Characteristics of Successful Entrepreneurs:
Passion & Motivation
The one word that describes the
basic requirement for an entrepreneurship venture is “Passion.”
v Is there something that you can work on over and over
again, without getting bored?
v Is there something that keeps you awake because you have
not finished it yet?
v Is there something that you have built and want to
continue to improve upon, again and again?
v Is there something that you enjoy the most and want to
continue doing for the rest of your life?
Your demonstration of passion and motivation will determine your
success in any entrepreneurial venture. From building and implementing a
prototype, to pitching your idea to venture capitalists, success is a function
of passion and determination.
You'll find that with these have a much easier
finally, it's impossible to be a successful entrepreneur if you aren't
passionate about your work. Passion can be defined subjectively, but what's
important is that you're excited to come to work every day. You may not like
every task you have to perform or every person you have to work with, but at
the end of the day, you must be both satisfied and exhilarated to be the leader
of your own enterprise.
Without passion, your productivity will suffer, but more
importantly, you'll never be happy with where you are. Only when you're truly
passionate about your work will you be able to find the success you yearn for.
Self-motivated
Successful entrepreneurs do not
need someone who holds them accountable or forces them to be efficient and
productive. Unfortunately, without a manager, many people cannot take their
business past the planning stages. It takes hard work to create your own
business; most people need someone who forces them to keep working. Moreover,
when people do not have someone to hold them accountable, they may let their
work’s quality suffer. For example, many freelance writers set their own hours
and choose their workload. However, for this same reason, many freelance
writers do not work how they ought to work.
Creative
When
creating a business idea, many entrepreneurs have to be very creative. There is
a good chance that someone else has already established himself as the
authority for the niche that a new entrepreneur chooses. However, with a little
creative twist, new entrepreneurs can take old ideas or business models and
revolutionize them, making them attractive to potential clients or customers.
Creativity allows for ideas and
innovation. Ideas and innovation often lead to money and success. Sergey Brin
and Larry Page founded Google in their colossal quest to master the Internet
search engine. Steve Jobs and Apple revolutionized the gadget industry with
iPods, Macbooks, and the iPhone. In many cases, a single creative idea can
makes its inventor billions.
The desire
to be an expert
Entrepreneurs like a challenge. If they didn't, they'd probably have chosen another line of work. But as exciting as it is to consider a new field, high-achieving entrepreneurs know the benefits of staying in the same industry for a while are immense. When you spend years in the same industry, you learn its history. Knowing what's been done before can help you identify how it can and should move forward. In the meantime, you'll build a network of relationships to support you in future endeavors, especially when times are lean. Those relationships are invaluable.
Entrepreneurs like a challenge. If they didn't, they'd probably have chosen another line of work. But as exciting as it is to consider a new field, high-achieving entrepreneurs know the benefits of staying in the same industry for a while are immense. When you spend years in the same industry, you learn its history. Knowing what's been done before can help you identify how it can and should move forward. In the meantime, you'll build a network of relationships to support you in future endeavors, especially when times are lean. Those relationships are invaluable.
A
forward-looking approach.
Successful entrepreneurs are always thinking ahead. They may stray from their roadmap, and that's okay, but they have one in mind. Having a clearly established set of goals will keep you from getting stuck. Your goals may be constantly evolving, but if you don't know where you want to go, chances are, you won't get anywhere.
Successful entrepreneurs are always thinking ahead. They may stray from their roadmap, and that's okay, but they have one in mind. Having a clearly established set of goals will keep you from getting stuck. Your goals may be constantly evolving, but if you don't know where you want to go, chances are, you won't get anywhere.
Risk Taking and Rewards
Entrepreneurs are risk takers ready to
dive deep into a future of uncertainty. But not all risk takers are successful
entrepreneurs. Successful entrepreneurs
are will to risk time and money on unknowns, but they also keep resources,
plans and bandwidth for dealing with "unknown" in reserve. When
evaluating risk, a successful entrepreneur will ask herself, is this risk worth
the cost of my career, time and money? And, what will I do if this venture
doesn't pay off?
Entrepreneurship requires risk. The measurement of this risk equates
to the amount of time and money you invest into your business. However, this
risk also tends to relate directly to the rewards involved. An entrepreneur who
invests in a franchise pays for someone else's business plan and receives a
respectable income, while an entrepreneur who undertakes groundbreaking
innovations risks everything on an assumption that something revolutionary will
work in the market. If such a revolutionary is wrong, she can lose everything.
However, if she is right, she can suddenly become extremely wealthy.
Self-belief, Hard work & Disciplined Dedication
Entrepreneurs enjoy what they do. They believe in themselves and
are confident and dedicated to their project. Occasionally, they may show
stubbornness in their intense focus on and faith in their idea. But the flip
side is their demonstrated discipline and dedication.
Adaptability & Flexibility
It’s good to be passionate or even stubborn about what you do. But
being inflexible about client or market needs will lead to failure. Remember,
an entrepreneurial venture is not simply about doing what you believe is good,
but also making successful business out of it. Market needs are dynamic:
changes are a recurring phenomenon. Successful entrepreneurs welcome all
suggestions for optimization or customization that enhances their offering and
satisfies client and market needs. A product you develop for yourself alone may
qualify as a hobby, but a product for the market should satisfy market needs.
Understand Your Offering – And Its Market
Entrepreneurs know their product offering inside and out. They
also know the marketplace and its dynamics inside and out. Remaining unaware of
changing market needs, competitor moves and other external factors can bring
even great products to failure (for example, Blockbuster).
Money Management
It takes time to get to profitability for any entrepreneurial
venture. Till then, capital is limited and needs to be utilized wisely.
Successful entrepreneurs realize this mandatory money management requirement
and plan for present and future financial obligations (with some additional
buffer). Even after securing funding or going fully operational, a successful
businessman keeps a complete handle on cash flows, as it is the most important
aspect of any business.
Planning (But not Over-planning)
Entrepreneurship is about building a business from
scratch while managing limited resources (including time, money and personal
relationships). It is a long-term commitment, and attempting to plan as much as
possible at the beginning is a noble impulse. In reality, however, planning for
everything and having a ready solution for all possible risks may prevent you
from even taking the first step. Successful entrepreneurs do keep some dry powder in reserve, but more importantly they maintain a mindset
and temperament to capable of dealing with unforeseen possibilities.
Do a feasibility
analysis; identify time and capital thresholds; take the deep dive with your
limited resources. If your thresholds are crossed, look for alternatives and be
prepared to take the next exit.
Networking Abilities
Many people seek comfort in commiseration: friends, colleagues and
neighbors are happy to complain with you about "the global slowdown,” poor
demand, or unfair competition; but that won't improve the bottom line. What do
successful entrepreneurs do? They reach out to mentors with more experience and
extensive networks to seek valuable advice. Having such networking abilities,
including more experienced mentors, is a key characteristics of successful
entrepreneurs.
Being Prepared to Take the Exit
Not every attempt will result in success. The failure rate of
entrepreneurial ventures is very high. At times, it is absolutely fine to take
the “practical” exit route and try something new, instead of continuing to
make sunk cost investments in the same venture. Many famous entrepreneurs
weren't successful the first time around. But they had the serenity and
foresight to know when to cut their losses.
The Bottom Line
Personal qualities and their correct demonstration with the
right stakeholders are the determining factors for success or failure as an
entrepreneur. A realistic self-assessment checklist against these suggested
guidelines will ensure you take the right steps in the right direction to
success.
Agility.
Agile entrepreneurs are able to treat every problem
they encounter quickly and adeptly, without taking too long to address them.
This agility allows entrepreneurs to remain proactive and vigilant, preventing
small problems from becoming major ones.
On a larger scale, this ability also allows entrepreneurs to
constantly change, and therefore improve, their businesses. With new
technologies, new resources, and new trends emerging daily, the most successful
businesses are ones who are able to adapt and grow with the times. Remaining
agile in a position of leadership enables this course of growth.
Patience.
Too many entrepreneurs get started with a business
based on dreams of becoming an overnight millionaire. Several leaders in the
tech sector with some great new idea have been able to seemingly rise to
success out of nowhere, but the reality is this level of success can only come
after years of hard, committed effort. Successful entrepreneurs realize that
all great things take time, and aren't impeded when their great ideas don't
take off immediately.
Patience also goes a long way when building the infrastructure
of your company. Great entrepreneurs want to build the best team, not one
pieced together with the first candidates that cross their paths. They're also
willing to make mistakes and go through temporary hardships if it's en route to
a more stable, successful long-term vision.
Trust
Mutual trust is a necessity when working in a position of leadership,
especially in the context of a small team that typically defines startups. For
example, entrepreneurs need to trust their team leaders to accomplish their
primary objectives without interference. If that trust isn't there, team
leaders will not be able to execute their work effectively. It's also a symptom
of a hire that isn't the best fit for the organization.
Of course, workers, partners, and investors
all need to trust you as an entrepreneur as well. You can cultivate this trust
by maintaining constant, transparent lines of communication, which will also
facilitate greater productivity and a tighter sense of collaboration within the
team.
Interest and Vision
The first factor for entrepreneurial success is interest. Since
entrepreneurship pays off according to performance rather than time spent on a
particular effort, an entrepreneur must work in an area that interests her.
Otherwise, she will not be able to maintain a high level of work ethic, and she
will most likely fail. This interest must also translate into a vision for the
company's growth. Even if the day-to-day activities of a business are
interesting to an entrepreneur, this is not enough for success unless she can
turn this interest into a vision of growth and expansion. This vision must be
strong enough that she can communicate it to investors and employees.
Skill
All of the interest and vision cannot make up for a total lack of
applicable skill. As the head of a company, whether he has employees or not, an
entrepreneur must be able to wear many hats and do so effectively. For
instance, if he wants to start a business that creates mobile games, he should
have specialized knowledge in mobile technology, the gaming industry, game design,
mobile app marketing or programming.
Investment
An
entrepreneur must invest in her company. This investment may be something less
tangible, such as the time she spends or the skills or reputation she brings
with her, but it also tends to involve a significant investment of assets with
a clear value, whether they be cash, real estate or intellectual property. An
entrepreneur who will not or cannot invest in her company cannot expect others
to do so and cannot expect it to succeed.
Organization and Delegation
While many new businesses start as a one-man show, successful
entrepreneurship is characterized by quick and stable growth. This means hiring
other people to do specialized jobs. For this reason, entrepreneurship requires
extensive organization and delegation of tasks. It is important for
entrepreneurs to pay close attention to everything that goes on in their
companies, but if they want their companies to succeed, they must learn to hire
the right people for the right jobs and let them do their jobs with minimal
interference from management
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